If an Unanticipated Decrease in Aggregate Demand Results in an Output

question 7

Multiple Choice

If an unanticipated decrease in aggregate demand results in an output below the economy's long-run capacity, long-run equilibrium will eventually be restored by

• A) an increase in the rate of inflation.
• B) lower resource prices and lower real interest rates.
• C) higher resource prices and higher real interest rates.
• D) a decrease in the natural rate of unemployment.

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Definitions:

Target Return

A financial goal specifying the desired rate of return on an investment or business venture.

Scenario B

A specific potential or planned situation, often used in planning processes to test different strategies or outcomes.

Competition-oriented

A focus or strategy that emphasizes understanding, responding to, and leveraging the competitive landscape in a market.

Loss-leader Pricing

A pricing strategy where a product is sold at a price below its market cost to stimulate sales of more profitable products or services.